California could be next oil boom state
By _Steve Hargreaves_ (mailto:[email protected]) _@CNNMoney_
(https://twitter.com/intent/user?screen_name=cnnmoney) January 14, 2013:
California's Monterey Shale, seen here, has a massive mount of oil and the
state could be poised for a boom, if it can safely get the crude out of the
ground.
NEW YORK (CNNMoney)
California is sitting on a massive amount of shale oil and could become
the next oil boom state. But only if the industry can get the stuff out of
the ground without upsetting the state's powerful environmental lobby.
Running from Los Angeles to San Francisco, California's Monterey Shale is
thought to contain more oil than _North Dakota's Bakken_
(http://money.cnn.com/2011/10/28/pf/America_boomtown_jobs/index.htm?iid=EL)
and Texas's Eagle
Ford -- both scenes of an _oil boom_
(http://money.cnn.com/2012/12/11/news/economy/oil-prices/index.html?iid=EL)
that's created thousands of jobs and
boosted U.S. oil production to the highest rate in over a decade.
In fact, the Monterey is thought to hold over 400 billion barrels of oil,
according to the U.S. Geological Survey. That's nearly half the conventional
oil in all of Saudi Arabia. The United States consumes about 19 million
barrels of oil a day.
"Four hundred billion barrels, that doesn't escape anyone in this
businesses," said Stephen Trammel, energy research director at IHS Cambridge
Energy
Research Associates.
The trick now is getting it out.
As a result of the San Andres fault, California's geologic layers are
folded like an accordion rather than simply stacked on top of each other like
they are in other Shale states. The folds have naturally cracked the shale
rock, and much of California's current "conventional" oil production -- the
third largest in the nation -- is thought to come from the Monterey.
But the folds mean recent advancements that have made shale oil and gas
profitable to extract -- horizontal drilling combined with _hydraulic
fracturing_
(http://tech.fortune.cnn.com/2012/12/13/solving-frackings-biggest-problem/?iid=EL)
-- don't work as well in California. It's hard to drill
horizontally if the shale is not flat.
Plus, it appears the Monterey is made up of shale rock that doesn't respond
as well to hydraulic fracturing -- the controversial practice known as
_fracking_
(http://economy.money.cnn.com/2012/10/01/matt-damon-fracking/?iid=EL) that
involves injecting water, sand and chemicals into the ground under
high pressure to crack the rock and allow the oil and gas to flow.
Still, the U.S. Energy Information Agency estimates there are over 15
billion barrels of oil that can be recovered using today's technology.
"That's a huge number," said Matt Woodson, an analyst at the energy
research firm Wood Mackenzie. Woodson said the 15 billion number far exceeds
current estimates for North Dakota's Bakken Shale, and is about half the
amount
held in _Alaska's North Slope_
(http://features.blogs.fortune.cnn.com/2013/01/03/kulluk-shell-alaska/?iid=EL)
before it was tapped.
That potential has attracted the attention of the oil industry.
Several oil companies have put together research teams to work on the
Monterey, said Katie Potter, head of exploration and production staffing at NES
Global Talent, a company that recruits oil industry professionals.
If the Monterey takes off, Potter said the impact on jobs in the state
would be huge, saying the _shale boom_
(http://money.cnn.com/2012/11/12/news/economy/us-oil-production-energy/index.html?iid=EL)
has already created
600,000 jobs nationwide over the last few years.
"It could potentially solve the state's budget deficit," she said.
Last month, the government held a lease sale to drill in the Monterey.
While only a modest 18,000 acres were offered, they were all snapped up.
Occidental (_OXY_
(http://money.cnn.com/quote/quote.html?symb=OXY&source=story_quote_link) ,
_Fortune 500_
(http://money.cnn.com/magazines/fortune/fortune500/2012/snapshots/309.html?iid=EL)
), which is California-based and
has long held acres in the Monterey, has had some success using a technology
known as deep acid injection, said IHS's Trammel.
The process involves injecting hydrofluoric or other acids deep
underground, where they eat away at the shale rock and allow the oil to flow.
It's
cheaper than _fracking_
(http://tech.fortune.cnn.com/2012/12/13/solving-frackings-biggest-problem/?iid=EL)
, said Trammel. And while it sounds ominous,
it may not be as controversial, as the volumes involved are far less and
it's not done under such pressure, he said.
Still, no matter how the oil is produced, environmentalists in the Golden
State are keeping close watch.
Fracking could still become an issue, as it has in other states where it's
led to fears over _groundwater contamination_
(http://money.cnn.com/2012/05/01/news/economy/fracking-violations/index.htm?iid=EL)
, said Nathan
Matthews, a Sierra Club attorney based in San Francisco. And there's no
guarantee
acid injection is much better.
Plus, there's air pollution, road congestion and other issues that go along
with an oil boom.
Matthews wants California regulators to require full disclosure of
everything the oil industry is putting in the ground, as well as individual
permits
issued for each well drilled.
"There's a chance to get this done much better than where it's been done
elsewhere," said Matthews. "We need to understand the risks before we open
the flood gate."
Regulations or not, there's still no guarantee there will be an oil boom at
all.
"It might not live up to its expectations," said Fadel Gheit, a senior
energy analyst at Oppenheimer. "The industry has not concluded whether it's
boom or bust."
But given the rapid advances over the last few years in _oil drilling_
(http://money.cnn.com/2012/12/06/news/economy/natural-gas-exports/index.html?iid
=EL) and producing technology, the smart money may be on boom.
"There are some pretty creative people in this industry," said Trammel.
"I'd say they are going to figure it out."
--
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